* Finland wants Greek assets transferred to Luxembourg
* Assets would provide collateral for new loans to Athens
* Greece would be sole shareholder in Luxembourg vehicle
* If Greece defaults, ownership passes to creditors
(Adds link to PDF of Finnish proposal, paragraph 6)
By John O'Donnell and Luke Baker
BRUSSELS, Aug 29 Finland has proposed that Greek
state assets be transferred to a Luxembourg-based holding
company and held there as security for new loans to Athens,
according to an internal document seen by Reuters.
The plan, drafted in June, remains a central plank of
current Finnish demands for collateral in return for providing
more aid. If it does not get its way, Finland may pull out of
the Greek bailout, sparking renewed chaos on financial markets.
Although small at around 1.4 billion euros, Finland's
planned support for Greece is important because its triple-A
credit rating adds weight to the 109 billion euro rescue agreed
on July 21, the second bailout package Athens has received.
Demands from Helsinki for collateral have sparked requests
from countries including Austria, the Netherlands, Slovenia and
Slovakia for similar treatment, and threaten to spoil the euro
zone's attempt to save Athens from default.
In the document, Finnish officials set out how the Greek
government and its privatisation agency would authorise the
transfer of assets to a holding company based in Luxembourg that
would be used as security for states giving assistance.
To see the document, click on: r.reuters.com/cyz43s
The privatisation agency would own all the shares in the
asset holding company, although the shares would be held in
custody by a third party. Since the holding company would be
based in Luxembourg, it would operate under Luxembourg law.
Such a move would likely prove controversial in Greece,
where the government has strongly rejected suggestions of
offering land or company shares as collateral for future loans.
It would in effect mean Greece losing sovereignty.
The Finnish proposal would hand over control of a sizeable
portion of Greece's assets to a foreign agency, limiting Athens'
autonomy in managing its finances and privatising state assets,
an area where scant progress has frustrated euro zone partners.
"The Privatisation Agency is managing the AHC (Asset Holding
Company) and can use AHC in a flexible way as one vehicle to
securitise, manage, develop and privatise assets," reads the
Finnish proposal, dated June 23.
MULTIPLE USE ASSETS
As well as acting as a warehouse for Greek property, such a
stake in a national phone company or port, the Luxembourg
vehicle would ringfence assets so they are not used for other
borrowing but instead kept as security for countries offering
aid. The Finnish document explains:
"If the market value of the assets of AHC does not meet the
collateral requirements or the Hellenic Republic defaults on its
loan obligations to the EFSF, the ownership of the shares in
custody immediately transfers to the relevant member states," it
says, referring to the European Financial Stability Facility,
the 440 billion euro bailout fund drawn up last year.
The Finnish plan also flags a possible securitisation of the
assets held in Luxembourg, using cash flow generated from an
airport, for example, as security for loans.
"The asset securitisation would make both the valuation and
the liquidation of the assets much easier," write the authors of
the confidential document, which has been circulated to euro
zone finance ministries in the form of a "non-paper".
The proposal is among those being discussed by euro zone
officials in conference calls in recent days to try to reach
agreement on how collateral can be provided to Finland, and
potentially other member states, in exchange for new loans.
So far, the Greek government has been slow to start its
long-awaited sale of state assets. It promised earlier this year
to raise 50 billion euros by 2015, but its failure to properly
start the process has frustrated lenders. [ID:nLDE7501CZ]
Earlier this year, ECB board member Juergen Stark put a
value on the country's assets, which include stakes in Athens'
airport, a bank, two ports, and the country's main telephone
company, of 300 billion euros ($423 billion). [ID:nLDE74M1ZB]
Tapping this wealth will be difficult politically. Talk of
selling state companies prompted protests by workers worried
they could lose their jobs in any privatisation.
Militant union members at the country's main electricity
producer have warned the government not to pursue a sale.